Apples and oranges

As of Friday, Apple’s market cap is down over 35% from its September 12, 2012 peak. However, since this article was first published on September 23, 2011, Apple’s market cap is actually up about 5%. So, many of the financial comparisons below remain reasonably valid, although the breathless Apple euphoria of the time is gone. 

This article is re-posted from my pseudonymous and nearly invisible personal blog matteblacke.wordpress.com

This tumblr collection of Things Apple is Worth More Than has been making the rounds. Although Apple’s market cap makes me proud to be an iPhone carrying American, this tongue-in-cheek list still drove me crazy. Because it is full of oranges.

Yes, Apple’s market cap is more than twice as much as the annual revenue of the clothing industry, but Apple is also worth more than five times as much as its own annual revenue. Which makes Apple even more bigger than itself than it is bigger than the clothing industry.

The last example, however, comparing Apple’s market cap to the three biggest drug companies, is a good one. I also heard Apple’s market cap is higher than all the European banks’ market caps combined. Not a good time for European banks.

On the other hand, Apple’s market cap is smaller than other things.

If Apple’s entire market cap was available in cash, we could use it to pay down our national debt from $14.73 trillion to a mere $14.35 trillion. Phew, glad we got that debt taken care of. Or put another way, the US government could borrow money (very cheaply) and buy Apple, only bringing the national debt up to a round 15 trillion.

If that’s not so satisfying, we could take the $380 billion and use it to buy the US all the oil it needs for the next six months. Or we could buy nine or ten days worth of the US gross national output, all the products and all the services.

I am happy Apple is worth more than Microsoft. I always knew it, in my heart. Now everyone knows. But Apple’s market cap is only half of Microsoft’s peak (which was in 2000). So, if you had sold all of MS in 2000 and put the money under your mattress, you could buy Apple today, and have enough left over to buy Google, Ford Motor Company, and Goldman Sachs. And why not grab the first company to pass a $1 billion market cap, US Steel, worth just $3 billion, one-hundred and ten years after it broke the $1B barrier. No, that’s not keeping up with inflation.

Finally, sadly, luck beats skill in the game of world’s most valuable companies. If Saudi Aramco, the Saudi Arabian national oil company, was publicly traded it is believed it would be worth somewhere between 2 and 7 trillion, or 6 to 18 times Apple.

Authors note: In retrospect, it is remarkable that so many investors overlooked Apple’s dependency on a single and hence vulnerable product, the iPhone. On the other hand, because of current phenomenal profits and declining market cap, Apple’s price-to-earnings ratio is more attractive than ever. Will the iWatch put them back up to $700 a share? No way. Expect an inflation adjusted $700 a share at least 5 years out and a 50/50 chance of never. I still want that watch, though.

Matt Beale

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